Articles Posted in Employment Contracts

In Noren v. Heartland Payment Systems, Inc., Docket No. A-2651-13T3, __N.J. Super. __ (Feb. 6, 2017), the New Jersey Appellate Division held that a provision in an employment agreement which provided that the employee “irrevocably waive[s] any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this Agreement” was unenforceable as to a former employee’s statutory employment claims.

Following his termination of employment, Noren sued his former employer alleging a violation of the Conscientious Employee Protection Act (“CEPA”), New Jersey’s employment whistleblower law. The lower court denied Noren’s demand for a jury trial based on the jury-waiver provision in his employment agreement and dismissed Plaintiff’s complaint after a lengthy bench trial. Plaintiff appealed, challenging the application of the jury waiver provision to his CEPA claim.

On appeal, the court focused upon the fact that CEPA and the New Jersey Law Against Discrimination (“NJLAD”) expressly guarantee a right to a jury trial. Given the statutorily guaranteed right, the Appellate Court determined that in order for the waiver to be effective it must “clearly explain (1) what right is being surrendered and (2) the nature of the claims covered by the waiver.” The court found that the jury waiver at issue was unenforceable because it did not make any “reference to statutory claims and did not define the scope of the claims as including all claims relating to Noren’s employment.”

In a recent New Jersey federal case, ADP LLC v. Lynch, 3d Cir. (Ambro, U.S.C.J.), the Third Circuit declined to lift an injunction prohibiting two former employees of ADP from soliciting its clients on behalf of a competitor. The injunction partially enforced non-compete agreements that Jordan Lynch and John Halpin agreed to online in what is commonly referred to as a “clickwrap” agreement. A clickwrap agreement is a type of contract in which a user must agree to terms and conditions prior to using the product or service. These are commonly used in the software or technology industry. It is interesting to see a court confirm its enforceability in the employment context.

Messrs. Lynch and Halpin each participated in ADP’s stock award plan for five consecutive years. To participate, they had to click on an electronic box to acknowledge that they had read related documents. Those documents included restrictive covenants which state that the employee cannot (1) solicit certain clients and prospective clients of ADP for one year after they stopped working for the company; (2) disclose any of ADP’s confidential information; or (3) use ADP’s confidential information regarding the identity of the company’s current, past or prospective clients. Mr. Lynch also signed a separate agreement, containing similar restrictions.

The employees resigned their sales positions at ADP and joined its direct competitor, Ultimate Software Group (“USG”). ADP sued Mr. Halpin and Mr. Lynch, asserting that they had violated their restrictive covenants. It also sought a preliminary injunction to prohibit them from working for USG and from soliciting ADP’s clients. Mr. Halpin and Mr. Lynch claimed that they never actually read or agreed to the restrictive covenants and therefore, the court should decline to enforce them as written.

The NJ Appellate Division has ruled, once again that it will not require enforcement of an arbitration clause absent a showing that the clause constituted a clear waiver by the plaintiff of his or her right to a jury trial.

In Anthony v. Eleison Pharmaceuticals LLC, Docket No. A-932-15T4 (App. Div. July 18, 2016), a former executive filed a lawsuit against his former employer under the New Jersey Wage Payment Act, alleging that the company failed to pay him wages that were due to him following the termination of his employment. The lawsuit also included breach of contract claims. The employer filed a motion to dismiss the lawsuit and order arbitration pursuant to a clause in the employment agreement which stated, among other things, that “[t]he parties agree that should any dispute arise out of this Agreement, a phased dispute resolution process shall resolve the dispute,” ending in binding arbitration. The trial court granted the employer’s motion, stating that the arbitration clause constituted a valid waiver by the employee of his right to pursue his claims in a judicial forum.

The lower court’s ruling in Anthony was clearly in error. The New Jersey Supreme Court ruled in Atalese v. U.S. Legal Services Group LP, 219 N.J. 430 (2014), that NJ courts will not enforce arbitration clauses unless they contain explicit language informing the employee that he or she was giving up the right to go to court and have a jury trial. The arbitration clause at issue in Anthony clearly did not contain such language. Accordingly, the Appellate Division reversed the lower court and the case will proceed to trial.

We are pleased to write that the New Jersey Supreme Court ruled, last week, that the two-year statute of limitations for filing a discrimination claim under the NJ Law Against Discrimination (“LAD”) couldn’t be shortened by an employer seeking to insert a clause in an employment agreement or contract.

The case arose when Raymours Furniture Co., fired an employee, Sergio Rodriguez who had signed a job application which stated, in capital letters, that he agreed “that any claim or lawsuit relating to [his] service with Raymour & Flanigan must be filed no more than six moths after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.” Mr. Rodriguez claimed that Raymour & Flanigan wrongfully terminated him on account of his disability and in retaliation for filing a workers’ compensation claim. He sued under the LAD nine months after he was fired. Both a trial judge and the Appellate Division ruled that the lawsuit was time-barred, even though New Jersey law allows a plaintiff two years to bring such an action.

The Supreme Court disagreed with the lower courts. The Court noted that the “contractual shortening of the LAD’s two-year limitations period for a private action is contrary to the public policy expressed in the LAD.” The Court noted the unequal bargaining power of the potential employer and employee. Clearly, mandating that the employee agree to a shorter statute of limitations in an employment application before they can be hired is, by definition a contract of adhesion. Although some employers may argue that two-years is too long of a time period to hold an employer responsible for defending an action for discrimination – where documents may have disappeared, key witnesses have left the company and the memories of decision-makers have faded – it is not for a private employer to alter a statutory limitation period by contract. We believe that this could only be done, after careful consideration by the legislature.

A recent case from the United States Court of Appeals for the Eighth Circuit makes clear that an employer will lose its contractual right to arbitration if it proceeds in litigation for eight months.  In Messing v. North Central Distributing Inc., the plaintiff, a former Vice President, brought a breach of contract and wrongful termination claim against his former employer.  The company actively engaged in defending the case in the litigation, including filing an answer with 24 affirmative defenses, removing the case to federal court, attending discovery conferences and setting discovery schedules, filing a venue transfer motion, and agreeing to a trial date.  Eight months into the litigation, the employer sought to compel arbitration under the Vice President’s employment contract.  The District Court denied the employer’s motion to compel arbitration, reasoning that the company had waived its right to arbitrate since 1) it knew of the existing right to arbitration, and 2) it had prejudiced the employee by acting inconsistently with that right.
On appeal, the Eighth Circuit upheld the lower court’s ruling, stating that the employer had failed to do “all it could reasonably have been expected to do” to assert its right to arbitration earlier.  Indeed, the employer’s answer did not plead the arbitration clause in its affirmative defenses, nor mention it at the pretrial scheduling conference, nor raise the issue in its motion to transfer venue.  Moreover, the Court credited the lower court’s finding that the employer’s actions had caused the employee prejudice, in that he had been forced to expend considerable time and money litigating the matter in federal court.
While there is a long line of cases which favor arbitration as an alternative way to resolve disputes between parties, employers and employees alike should be aware that a contractual right to arbitrate claims must be asserted in a timely way by the party seeking arbitration.  This “use it or lose it” principle is sometimes an effective way to defeat an otherwise unassailable arbitration provision.

As reported by NJ.com, Governor Chris Christie has vetoed SB 992, a bill which sought to bar gender-based pay discrimination.  A full text of the proposed legislation may be read here.  The bill would have amended the New Jersey Law Against Discrimination by adding language prohibiting an employer from paying one gender less than the other for “substantially similar” work.  Employers would be permitted to pay workers of different sexes doing similar jobs in an unequal manner only if they could demonstrate that the unequal treatment was justified based on factors such as training, education, experience, or job performance.  The bill also contained a triple damages provision for employees who won cases brought under the law, and a transparency provision mandating that businesses who contract with the State file equal pay information to ensure compliance with the statute.

Governor Christie, in his veto message, criticized the law as “depart[ing] significantly from well-established law” and stated that the law would make New Jersey “very business unfriendly.”  The bill’s main sponsor, Sen. Loretta Weinberg (D-Bergen), has signaled that she may attempt a veto override, in that the bill passed by decisive margins in both houses — 28-4 in the Senate and 54-14-6 in the Assembly.

Pay equity is an important issue to New Jersey’s professional workforce.  There is no question that women and men should be paid the same for the same or similar work.  There is also no question that this bill would have helped New Jersey to achieve its goal of eradicating discrimination from the workplace.

 

We are pleased to report that the Appellate Division, in Morgan v. Raymours Furniture Company, Inc., rejected Defendant’s motion to compel mandatory arbitration.  In this case, the employer, Raymour, sought to compel arbitration based upon an arbitration policy contained in its employee handbook that was circulated electronically.  The handbook contained several disclaimers advising that nothing in the handbook could be enforced as a contract, and that none of the terms of the handbook could be enforced against the employer.

The Court emphatically rejected the Defendants’ claim that there was an enforceable arbitration agreement, and held that the same disclaimers that prevent a contract from forming against the Defendant also prevent a contract from forming against the Plaintiff.  Even more important, the Appellant Division ruled that a motion to compel arbitration is actually akin to a motion for an injunction, and that therefore the motion could be denied on purely equitable grounds.  This will permit Plaintiff employees to argue that motions to compel mandatory arbitration can be rejected based on grounds of fundamental unfairness.

Hopefully this decision will be upheld on appeal and Plaintiff employees will not be denied access to courts and juries on account of obscure arbitration clauses.

We have negotiated many settlement agreements for claims brought under the New Jersey Law Against Discrimination (“LAD”), the Conscientious Employee Protection Act (“CEPA”), and various other New Jersey laws that have included a provision barring the settling employee from seeking future employment with the defendant employer.  Employers argue in favor of including these clauses in order to prevent future claims of retaliation in the event the employer does not agree to re-hire the employee.  Truth be told, most employees have no desire to work again for the offending employer, but these no re-hire provisions can become complicated when companies are sold and/or merged and the employee seeks future employment with the re-constituted employer.

A federal court in New York (see, Reyes v. Hip at Murray Street) recently refused to approve a proposed settlement for a lawsuit brought under the Fair Labor Standards Act because it contained such a no re-hire provision.  It will be interesting to see if there is more push back on these clauses in settlement agreements for a wider range of employment law claims.  Stay tuned!

In a recent case, Hargrove v. Sleepy’s LLC No. A-70-12 (072742)(N.J. Jan. 14, 2015), the Supreme Court of New Jersey held that the proper test to apply when determining an individual’s status for purposes of the New Jersey Wage Payment Law is the “ABC test”.

The case involved three plaintiffs, delivery truck drivers, suing Sleepy’s individually and on behalf of a putative class.  Sleepy’s had contracted with individuals and delivery companies to provide delivery services to its customers.  The plaintiffs claimed that Sleepy’s had misclassified them as independent contractors rather than employees and, in doing so, denied them the benefits and protections that they otherwise would have been entitled to under New Jersey’s wage and hour laws.

The lower federal court applied the federal common law test that focuses primarily on the employer’s ability to control the contractor’s work performance, and awarded summary judgment to Sleepy’s.  The plaintiffs appealed and the Third Circuit asked the NJ Supreme Court to consider the specific question of which test should be applied to determine independent contractor status.  At least four different tests had been used in New Jersey to determine employee vs. independent contractor status for purposes of unemployment, whistleblowing, discrimination and tort claims so the Court in this case was asked to decide which test to use for purposes of the wage and hour laws.

The recent U.S. Supreme Court decision in Integrity Staffing Solutions v. Busk is a blow to hourly employees nationwide.

The employees at issue in Integrity Staffing were employed to retrieve products and package them for delivery to Amazon customers.  These employees claimed that they were entitled to be paid for the time spent undergoing security screenings before leaving the warehouse each day.  They estimated that these screenings took about 25 minutes each day, or about 2 + hours per week.

The Court analyzed this case under the Portal-to-Portal Act, which exempts employers from paying employees for activities that are preliminary and postliminary to the “principal activity or activities.”  It found that the screenings were not the employees’ “principal activities” because Integrity Staffing had not hired them to undergo security screenings.  Moreover, it found that the screenings were not “integral and indispensable” to the employees’ work as warehouse workers because they could perform their jobs, retrieving packages, without the screenings.  The Court rejected the test used by the Ninth Circuit – whether an employer “required” a particular activity – in determining whether such activity was compensable under the federal wage and hour laws. The Court stated that that standard would be too broad and would run contrary to the intent of the Portal-to-Portal Act.